Published In CommPRO,biz 2013.11.26

 

Ignoring the Obvious

We are five years into a worldwide recession. And while the United States is very sluggishly gaining ground, much of the rest of the world is sliding further into the abyss. Germany has parlayed a heavily subsidized manufacturing sector into the best of a bad lot. The rest of the Euro block is gasping for air. Yet many in Europe and in the United States seem determined to defy history in dealing with this downturn.

The only folks in America who are doing well are at the top; up and running on the no-strings-attached-taxpayer-funded bailouts. The stock market is soaring, the too-big-to-fail banks that triggered the recession, the super rich, big business, they’re all singing happy days are here again. Meanwhile, the middle class, small business, and the poor are left struggling. The solution, we are told, is austerity, a focus on our nation’s deficit. This plan from the folks who created the deficit with the first wars in our history that we made no effort to pay for as they were fought, and a tax cut.

The economic cancer we gave Europe has ravaged the continent. Especially those who have entered the job market in the five years since its onset. Youth in some European nations face 50% unemployment, and even those who are working are grotesquely underemployed. They are in a way a lost generation. Many who have advanced degrees, masters, even doctorates, are lucky to find menial work. Many are in their late twenties, some in their thirties; robbed of their future, their hopes for career and family lost.

History teaches a very different lesson. Every single economic downturn since the modern economic age dawned with the industrial revolution has been overcome by government intervention. Let’s look at recent history. America went into WW2 deep in debt. The debt had increased by the war’s end in spite of astronomical wartime taxes. Then we spent on the GI bill, educating returning veterans and subsidizing their home ownership. We rebuilt our former enemies’ homelands and hardly took a breath before the war in Korea. After he got us out of that war President Eisenhower went on a spending spree building our interstate highway system. At the time he made it out to be needed in case we had to move a lot of troops around in a hurry, but it was really a way to boost the economy. High end tax rates for the very rich soared to 90%. And America boomed.

In contrast we are allowing our roads and infrastructure to decay. Education is the last thing on our minds; we are forgoing the future, following a path of proven failure. Those few who are benefitting from this folly will find that it can’t go on forever, it is unsustainable. As our roads and bridges break down, as the economy decays, they too will find their positions in decline. They’ll discover – perhaps too late – that the ethically and morally wanting path they have chosen, is economically wanting for them as well.

Published 2013.11.12 CommPRO.biz

Let The Seller Beware!

Cohn & Wolfe, a division of international communications giant WPP, just released From Transparency to Full Disclosure, a study they commissioned to find marketplace hot buttons. They polled 3,000 consumers in Great Britain, China and the United States on what opens their wallet. Price and quality were the overall winners with honesty (AKA ethics) coming in third place, except in China where quality and honesty beat out price. 

The transparency part comes from consumers’ interest in the values adhered to by the companies they do business with. They want the goods they buy created and sold by folks striving to do as they would do, folks who put their customers, workers, vendors, their communities and the environment ahead of profits. They worry most about the food they buy, that it is what it’s claimed to be and that it is produced with the buyers’ safety and health foremost.

You know what they hate most? A cover-up. They understand that we all goof-up now and then, but they expect us to fess-up immediately and do right by those who may have been misled or injured as a result of the error. What’s more, they have a clear view of where the buck stops, it stops at the top. The Cohn & Wolfe study found that “84% of UK and US consumers and 90% of Chinese consumers believe that if you are the leader of a company you cannot claim ignorance about something bad happening in your business, showing that there are no excuses for today’s leader.” They summed it up succinctly: “CEO = Chief Ethics Officer.” A point missed by the leaders of too many corporate entities of late.

The results of this study read like “Basic Communications 101.” Isn’t this what we’ve been telling our leaders or our clients?” Isn’t this what has been shown as the most profitable business model? Isn’t this what attracts and builds the most talented team in communications or any business? Of course it is. It’s the kind of team we all want surrounding us. The kind of team we all want to be a part of. If you are a leader, if you are the Chief Executive Officer (AKA Chief Ethics Officer), what are you waiting for? If your CEO doesn’t understand how interchangeable that title needs to be, what are you waiting for?

It all comes down to “Why would you work for, or do business with a crook?” While that quote sounds like Will Rogers, it isn’t and it doesn’t matter who said it, it’s a simple truth; one that only a few shortsighted business leaders choose to ignore. Actually people expect more than someone who just walks a line between lawful and criminal. We expect the businesses we trust with our hard earned cash to do right by us, to do the right thing. When they misrepresent their offerings, or dance around the truth, they betray us. And usually we simply never do business with them again — never.

Published 2013.10.31 CommPRO.biz

Do No Harm

The Hippocratic Oath is a widely edited set of guidelines credited to a long-ago Greek medical practitioner. It is estimated that 98% of medical students swear some form of oath, as do a large percentage of dental graduates. These oaths are focused on ethics and are often condensed into, “Do no harm.” Recent reports of predatory lending practices by doctors and dentists give us a picture of the other two percent.

Patients who lack insurance and those who need or want procedures not covered by their insurer, are being herded into various medical credit cards that are little more than tools created to ripoff the unwary by the monster banks and their lackeys. Wells Fargo and Citibank seem directly involved while others hide in the shadows providing the funds for the smaller credit card issuers. It’s the same set of scams and scammers that created the sub-prime mortgage disaster and more recently the on-going payday loan racket. They seem to be betting on the Justice Department giving them another get-out-of-jail-free card no matter how or who they ripoff.

The unwary –Who doesn’t trust their doctor or dentist?– sign up for these cards right in the doctor’s or dentist’s office. They are told that they will pay no interest if the card is paid off in three or four easy payments. What the docs don’t say is that you will be slapped with interest charges –close to 30% in some cases– if you don’t pay up before the end of the interest free period.

Let’s say you owe $1,000, about average for extensive dental work or plastic surgery. And let’s say you haven’t been able to make any payments over the four month interest free period. In most cases you’ll owe interest from the first month on the entire $1,000, plus the compound interest for the additional three months. You’ll be in hock for a lot more when the fourth month comes around. You can see that this is not going to end well when you start adding on late payments etc.

One of the independent card companies specializing in healthcare credit cards is said to have between five and ten million card holders. In addition to the medical practitioners who swear to do no harm, there are medical device hustlers, selling everything from power scooters and chairs, to hearing aides. These people aren’t even restrained by a “Do no harm” oath. Although, when bucks are at stake some doctors and dentists don’t seem able to recall that phrase.

These practices are beyond unethical, beyond immoral. Doctors and dentists who lead people into these scams may not be breaking any laws, but they are certainly –or should be– on shaky ground with state licensing agencies. A few suspensions would slow down this racket A couple revocations for the worst cases might stop it dead in its tracks. It’s a shame when a few scammers can cast a shadow over a largely principled group of professionals pledged to do no harm.

Published 2013.10.24 CommPRO.biz

Shareholders Come Last!

Corporate America, particularly the Monster Too-Big-To-Fail Banks, have it all backwards. A crazy concept, Shareholder Value, conceived as a business strategy in the late 1980s by college professor Dr. Alfred Rappaport, continues to ravage our economy even though it has been thoroughly discredited. One of its early advocates, Jack Welch, sang its praises back then when he was CEO of General Electric. He touted shareholder value for all to hear. Twenty years later in 2009 Welch turned around and said in a newspaper interview, “Shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy; your main constituencies are your employees, your customers and your products".

Welch isn’t the only one to see the light. Jim Collins of Good to Great fame has been pointing to what makes great companies and the importance of long-term strategies rather than the quarter-to-quarter madness obsessing our corporate world today. It is especially dangerous in the case of the Monster Too-Big-To-Fail banks. Striving for short term goals, empowered by immunity from gambling laws, FDIC protected depositors, seemingly unlimited interest-free money from the FED, and the knowledge that there’s a taxpayer bailout waiting if they go too far, leads them to take wildly reckless chances. And the Monster Banks are doing just that, they are going too far.

Back in the real world where corporations are coming to the new Jack Welch, Jim Collins view, they understand that sky-high executive compensation encourages greed, not leadership. Measure after measure shows a different parameter on the road to success. Perhaps most dramatic is the work of two Professors Rajendra Sisodia and Jagdish Sheth. They set out looking for companies that met a list of standards that at first glance seem out of reach, companies that focused on their customers, their employees, their vendors, their communities, the environment and finally last in line, their shareholders; companies striving to serve all their stakeholders. They call them “Firms of Endearment.”

The professors partnered with writer David Wolfe who suggested that before they got too excited when they actually found more than two dozen such companies, that they had better check to see if any of these companies made any money. You know, the “result” where Jack Welch pointed out that shareholder value comes into play. To everyone’s surprise the public companies that made the Firms of Endearment list returned eight times the S&P average over the ten years prior to the list compilation.

Clearly this shows beyond any doubt that all things being equal, the Firms of Endearment high road is far superior even to the taxpayer supported route the Monster Banks inflict on our society. The whole idea that if you take care of the basic stakeholders, your bottom line will take care of itself is lost on these folks. David Wolfe wrote a great book, Firms of Endearment, that details the high road research and results. If you are holding your breath waiting for the Monster Bank CEOs to read it, forget it.

Published – CommPRO.biz 2013.10.18

Shortages That Kill

It seems that every time we try to get something right, some scumbag figures out a way to game the system. While this fact of life is annoying wherever it shows up, it’s deadly when it rears its viperous head in life and death situations. So it is with generic drugs. Once we get past the inflated profits Big Pharma reaps -based on the phonied-up costs to develop a truly new drug- our expectation is that generic versions will serve us at reasonable costs.

We know all about the inexplicably legal game Big Pharma plays where they get to pay off the generic manufacturers to hold off production until they can squeeze the last drop of bloated profit out of the original patented version. As if that isn’t bad enough, it turns out there’s another equally ridiculous legal loophole allowing drug buying groups to bribe their way to higher profits at a cost of billions (out of our pockets) and -more important- at the cost of life itself.

This situation, according to published reports from medical and pharmaceutical practitioners, has its roots in 1987. You remember the “eighties” when “K” Street lobbyists seemed able to write any crazy thing into a law and find one of those we elected to serve us, willing to serve their special interest – for cash. Well, in 1987 Congress passed the “Medicare Safe Harbor Act” giving pharmaceutical buying groups a get-out-of-jail-free card to take vendor kickbacks (AKA bribes).

Since then these huge entities have controlled the manufacturers of generics that are mostly injectables used in hospital settings, antibiotics, pain meds, chemo drugs and anesthetics among others. These buying groups have in some cases limited manufacture to a single company. They have driven pricing so low, that eventually no competitors to their “Favored One” are left standing.

How are low prices bad for us? When a dominant buyer is able to drive pricing below the level of reasonable profits for the producers, there is no longer a truly competitive marketplace. That’s exactly what’s happened in the generic pharma world, resulting in unacceptable and dangerous shortages. A buying group source claims that they “encourage the free market by competitive bidding and multiple rewards for the best supplier performance.” We are with him until the multiple rewards part (sounds like bribes to us).

All of this was thought to be addressed in a 2012 law. Instead by mid-2013 drugs in short supply had soared from near two hundred to near three hundred, a fifty percent surge in one year. How did that happen? While we have no details, we’re betting it had to do with the buying group lobbyists. While we don’t pick up these drugs from our family drug store, we all have a vital stake. It is past time for this perverse law, the innocent sounding 1987 “Medicare Safe Harbor Act,” to have its quarter century of greed driven rule brought to an end. It is time to restore ethics and a true free market to this vital healthcare sector.

Published CommPRO.biz 2013.10.11

Reputation – A Road to Profitability

 

In the run up to its 2013 COMMIT!Forum this week (2013.10.8-9), CR Magazine released the results of a piece of research it commissioned on the effect corporate responsibility and reputation have on recruiting. They had a pollster ask people if reputation would impact their thinking before they took a job. These days you wouldn’t think it would be a big deal. Surprise! 69% said they would pass up a job offer from a smarmy company. This was true of those who have a job and those who are unemployed.

When asked what it would take to get them to take a job with a less than top rate company, the answer was a huge raise, at least 50%, more and in some cases they would not move unless their pay was doubled. On the other hand, 84% would move to a more reputable company if offered as little as 1% to 10% more pay. It seems pretty clear that a quality workforce is easier to hire and less costly for reputable companies. And your best people are at risk if your reputation is shaky.

More than their workforce is at risk for financial organizations with a less than stellar reputation, according to the 2013 Makovsky Wall Street Reputation Study. Communications firm Makovsky commissioned this study to measure the impact of reputation on financial companys’ revenues. We know this segment enjoyed a robust recovery thanks to the bailouts and zero interest FED loans. Their smarmy reputation is costing them revenue, however.

The researchers contacted communications professionals in the sector and asked a range of questions about revenues and what their companies are doing to deal with customers’ negative views. On average, revenues are down 9%, a hefty price to pay. Lost revenues total hundreds of millions. Six in ten companies believe it will take five more years to catch up to where their reputations were before the crash. Only one in four say their firm has already reached that level; obviously that may include wishful thinkers.

Study after study show that firms working to do the right thing see a positive impact on their bottom line. The CR Magazine study shows that most people are focused on working for companies with a reputation for doing the right thing. The Makovsky Reputation Study shows that even Wall Street firms can profit by doing the right thing. Makes you wonder why people like Jamie Dimon at Chase and Lloyd Blankfein at Goldman Sachs keep pushing a culture of profits before any thought about doing the right thing.

Too many business leaders confuse compliance with ethics. Blankfein is a lawyer, trained to see the edge of the law as defining right and wrong; that’s compliance, not ethics. Doing the right thing has nothing to do with compliance. Compliance is what you can get away with, not the right thing. Reputation is about the right thing. Research shows if you strive to do the right thing, profit takes care of itself.

Published CommPRO.biz 2013.10.03

Wall Street Ethics

Mid-September (2013.09.15) marked five years since Lehman Brothers, one of the largest investment banks ever, filed the largest bankruptcy ever, sending sky rockets up all over the world and marking the beginning of what we’ve come to call the “Great Recession.” Lehman’s implosion triggered a serious of herculean bailouts of the rest of our banking sector by the American taxpayers.

Hank Paulson, who became Treasury Secretary after a career at Goldman Sachs, saw a danger of another depression if the banking sector collapsed. He hurriedly threw together the bailouts. However, he failed to impose the controls needed to keep the banks from abusing these funds, leaving them free to award themselves over the top bonuses. The Federal Reserve kicked in billions more, throwing open the doors to the risky gambling (see London Whale) that caused the collapse.

Lehman wasn’t the only bank gone wild; all of the dozen or so monster banks were behaving badly. Lehman was just pushing the limits of the regulation-free climate the banking lobby created over the preceding two decades. Repo 105 was the accounting gimmick of choice at Lehman. The tricksters there would sell off billions of their really bad stuff before each quarterly reporting period, making their books look as though they were sound when in fact they were anything but. Emails, written just before the bankruptcy, show that senior management pushed their subordinates to cover their tracks.

On May 18, 2008, almost exactly two months before the bankruptcy filing, Senior Vice President Matthew Lee had a letter hand delivered to four of Lehman’s top executives with a copy to their house counsel. In it he detailed these practices and questioned both their legal and ethical grounds. Management responded by firing him. Later, Lee identified Repo 105 as one source of the collapse for the federal investigators. Matthew Lee is still out of a job today; nobody on Wall Street has hired this honest man.

Not so most of the schemers who played fast and loose with the financial facts at Lehman. According to a Huffington Post tally, three quarters of the Lehman folks -47 of 63 involved in the Repo 105 scam- are employed in the financial world and doing just fine thank you. In fact, while most Americans are struggling to recover from the crash and millions are unemployed, the Wall Street banksters are fine.

And why shouldn’t they be –aside from ethics and stuff like that– the banks know if they overplay their hand again, Repo 105 or whatever, a taxpayer bailout is just around the corner. So they gamble with your savings, secure in the knowledge that the FDIC will cover their losses and that we’ll loan them whatever they need to get back on their feet. Just don’t ask them to support the small businesses that create jobs or anything like that. Leave that to the suckers who run the regional and community banks.